Serbia must accept Kosovo plan or risk isolation: minister

BELGRADE (Reuters) - Serbia must accept a European Union-brokered plan to tackle the ethnic partition of its former province of Kosovo, or risk isolation, the country's finance minister said on Thursday.

Serbia says it has until Tuesday next week to tell the EU whether or not it accepts the plan, which the government on Wednesday described as "catastrophic" for ethnic Serbs in Kosovo where ethnic Albanians form the majority.

But rejecting the plan could cost the country a coveted place at talks on joining the EU, a process that would drive reform and lure investors to the struggling Serbian economy, the biggest in the former Yugoslavia.

In the first clear 'Yes' or 'No' by a cabinet minister, Finance Minister Mladjan Dinkic, leader of a junior partner in the ruling coalition, said Serbia had to "close a chapter of history and turn to the future".

"We need to move towards the EU and to accept a solution with which will begin a lasting and stable relationship with Pristina, without forgetting the Serbs in Kosovo," Dinkic told the state broadcaster.

Crunch talks between the prime ministers of Serbia and Kosovo, mediated by EU foreign policy chief Catherine Ashton, broke up in the early hours of Wednesday without result.

Ashton is due to issue a progress report on April 16 that will likely decide whether the bloc opens accession talks with Serbia in June, potentially a major milestone in the country's recovery from a decade of war and sanctions in the 1990s.

The last of those wars was in Kosovo in 1999 when NATO launched air strikes to halt a brutal Serbian counter-insurgency campaign in what was the one of its southern provinces.

The majority-Albanian territory later broke away and declared independence in 2008, but Belgrade retained a fragile hold on a small Serb-populated pocket of northern Kosovo. But it was an ethnic partition the West said it would never allow.

With neighboring Croatia set to join the EU in July, Serbia is striving to start accession talks, but is under pressure from the West to end the ethnic partition in Kosovo.

Belgrade has not said exactly what the latest proposal contains, but has made clear it falls far short of the broad autonomy it demands for the 50,000 Serbs living in northern Kosovo.

The decision whether to accept the plan or not threatens to split Serbia's ruling coalition and could trigger violence in Kosovo.

"If the agreement is rejected, the consequences would be harmful and Serbia would be indirectly isolated, which we mustn't even contemplate," Dinkic said.

"Who knows when we'll join the EU, but we have to maintain good relations with members of the EU, where we send 62 percent of our exports," he told Radio-Television Serbia.